US regulators are scrutinizing whether prices are being manipulated in the world's largest gold market. The Commodity Futures Trading Commission is examining the setting of prices in London and looking at issues including whether the setting of prices for gold is transparent.

U.S. regulators are scrutinizing whether prices are being manipulated in the world's largest gold market, according to people familiar with the situation.

The Commodity Futures Trading Commission is examining the setting of prices in London, in which a handful of banks meet twice daily and set the spot price for a troy ounce of physical gold, the people said.

The CFTC is looking at issues including whether the setting of prices for gold—and the smaller silver market—is transparent. No formal investigation has been opened, the people said.

The inquiry comes as regulators expand their review of global financial benchmarks in the wake of an interest-rate rigging scandal. Three large banks have agreed to pay a total of $2.5 billion in penalties over alleged manipulation of the London interbank offered rate, or Libor, and more than a dozen financial firms are still under investigation.

The daily gold price set by a group of banks affects jewelry prices world-wide and determines how much mining companies earn selling raw metals to refineries.

It also helps determine the value of derivatives whose prices are tied to the metals. U.S. commercial banks had $198 billion of precious metals-related contracts outstanding as of Sept. 30, 2012, according to the Office of the Comptroller of the Currency.

The CFTC's move is the latest sign of a once-obscure regulator flexing its muscle in the wake of the financial crisis. The agency, headed since 2009 by Gary Gensler, a former Goldman Sachs Group Inc. GS +0.93% executive, has played a leading role in the world-wide interest-rate investigation.

Mr. Gensler has called for reforms to Libor and other benchmarks that would require them to be based on actual transactions, rather than estimates submitted by industry firms. Mr. Gensler is co-chairman of a task force of international regulators examining these benchmarks, which plans to issue a new set of guidelines this spring.

"The idea that pervasive manipulation, or attempted manipulation [of interest rates], is so widespread should make us all query the veracity of the other key marks," said CFTC Commissioner Bart Chilton at a Feb. 26 roundtable in Washington on financial benchmarks. "What about energy, swaps, the gold and silver fixes in London and the whole litany of 'bors'?" he said, referring to Libor, Euribor and other benchmarks.

In the Libor case, traders allegedly manipulated data provided to the industry organization that publishes the benchmark rate in an effort to create profitable trades. Barclays BARC.LN +0.97% PLC, Royal Bank of Scotland Group RBS.LN +1.78% PLC and UBS AG have reached settlements, and more than $1.2 billion of their fines have gone to the CFTC.

CFTC officials have said Libor caught their attention because the agency had brought a series of cases in 2003 to 2005 sanctioning firms and traders for trying to manipulate natural-gas prices by reporting fake information to firms that compile energy indexes.

The CFTC began investigating complaints of misconduct in the silver market in 2008 after some investors argued that a steep price decline that summer was the result of market manipulation.

The CFTC never announced results of that investigation or officially confirmed it had closed.

A CFTC spokesman didn't respond to requests for comment.

The potential for manipulation of the London price-setting has long been a subject of debate in the gold and silver markets.

"It's always been on the mind of those who dwell on conspiracy theories," said Kurt Pfafflin, a senior metals broker with Daniels Trading in Chicago. He said he doesn't believe spot prices are being manipulated.

The price settings, which date to 1897 in the case of silver and 1919 for gold, now take place now via conference calls among banks. The gold calls occur at 10:30 a.m. and 3 p.m. London time. The silver call occurs once daily at noon.

Representatives from the other two banks couldn't immediately be reached.

Trading of physical gold on the spot market and trading of gold futures contracts continues alongside these teleconferences in their respective markets in London and New York, and doesn't pause while the price setting is decided.

The price settings are "very much done on a demand-supply basis until a price is arrived at. It's fully transparent. It's nothing like Libor," said a spokesman for the London Bullion Market Association, which sets the standards for the quality of gold and silver traded in the London market. It doesn't run the pricing.